Why Should A Person Believe In Austrian Economics?

It is not a question of ‘belief’. There are five or six different strategic economic biases in favor of a different set of levers for encouraging an economy. These different levers vary from the fastest and most redistributive and distorting to the slowest, least redistributive and distorting.   They are loosely Modern Monetary (fastest), Monetarism, Fiscal Policy, Industrial policy, and Human Capital policy (slowest – austrianism).

The other criticisms of the ideas of these schools as consisting of ‘true’ or ‘false’ propositions are absurd. All schools are merely utilitarian, and reward one or more sectors of an economy and one or more social classes, asymmetrically. All have side effects that are positive or negative.   Austrianism trades slower growth for greater personal freedom, greater innovation, smaller boom and bust cycles, with greater development of a natural aristocracy, and natural intertemporal increases in the rate of expansion of the economy between the classes.

The competition between the schools is merely a preference for one set of EXTERNALITIES over another set of externalities.  With austrianism preferring to cause the lowest redistribution of capital, and the greatest reward, and greatest incentive for entrepreneurship, and the least incentive for political actors, and the greatest diversity of wealth (inequality), in exchange for greater relative wealth for all.  It also has the best system of feedback for the expansion of positive norms – which conservatives feel (correctly) are more important for the expansion of an economy than any other property.

Claims that austiranism is apodeicitcally certain are specious.  Any system so certain must be substantially complete, and praxeology as it is currently constructed is incomplete enough that it cannot render judgements of certainty except in the most reductio (absurd) cases. (I am trying to fix this problem but it will take me another year or so.)   Instead, praxeological analysis simply exposes the the incentives of individuals and illustrates their rational actions,  IN effect allowing us to judge whether our ascertations about human behavior are true or false.   This leads to exceptional insights about human nature in an economy.  However, a) this does not invalidate the other schools only opens the door for discussions of trade offs.  b) we have been wrong on a number of topics that appear to be rational to individual actors but in practice are false (stickiness of prices, and irrationality of actions.)  

The central tenet of austiranism, is the business cycle theory, which states that any  intervention in an economy will pervert incentives and information and causes worse busts and booms.  This argument appears to be correct. It is just questionably useful in a democracy where voters will demand action from government.

A wise man would say, that each of these sets of levers and externalities has value to moving an economy.  But that it appears to be impossible in our democratically structured politcal system, to use each lever for the purposes to which it is suited, and for the benefit of all.  Politics in democracy is a means of obtaining power to conduct rents.   And since each of the different schools and their levers allows a different kind of rent to be sought for a different class of citizens, we merely fight over the control of these levers for our sects.

You will not likely hear this explanation elsewhere. You may not understand this explanation.  Because I cannot take the time, sitting in my hotel room, to write a twenty page essay on the topic.  However, it is most likely the only correct analysis of the different economic schools currently available.

(Thank you for asking me to answer this question. Although I think only the most sophisticated of students will understand it.)


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